In recent years, Taiwanese people have paid increasing attention to financial literacy, and the results are in. According to the 2024 Taiwan Financial Lives Survey, awareness of fraud has increased significantly. Overall financial resilience has improved significantly, and financial health is trending optimistically, however the survey also shows that the behaviors of the financially vulnerable still need to be improved. Blind spots and myths persist in this group, and there is an urgent need to strengthen education to improve their financial literacy.

65% believe they wouldn’t be fooled by fraud

As overall financial awareness increases, fraud prevention has also been strengthened, and lending behavior has gradually shifted from the informal economy into formal financial institutions. Even with the invention of new fraud techniques, vigorous government education on fraud has increased public awareness. The survey shows that 65.72% of respondents are confident they can detect and refuse financial fraud, while only 11.61% express no confidence at all (Figure 1).

Because the survey period was in the first half of the year, the central bank had not yet introduced the current credit card controls, so the real estate market was booming. The survey found that this lending boom was driven by demand for both financial and real estate investment. Due to the increased demand for loans for investment, as opposed to debt repayment, formal financial institutions became the public’s first choice for borrowing. The proportion of people choosing to take out loans from banks increased from 33.6% in 2022 to 67% in 2024 (Figure 2). In particular, the proportion of those borrowing from financial institutions to buy houses or invest increased from 43.6% in 2022 to 56.25% in 2024, while the proportion borrowing from relatives, friends, or underground banks dropped from 14.8% to 10.55%.

Higher cost of living

As life returns to normal after the pandemic, many government subsidies have not been renewed, and consumer demand and living costs have risen over the last two years, reflecting significant inflation. The proportion of respondents reporting “moderate” difficulty on the “supporting lifestyle” indicator increased to 79.35% (Figure 3). As prices rise with consumer demand, fewer people think that financially supporting their lifestyle is “easy,” and many are feeling increased pressure. However, due to the various support measures still in place, those that were already disadvantaged, whose costs of living were already difficult to handle, felt little change.

Although the average risk resistance score remained roughly the same, among the four survey aspects of financial resilience, the public’s performance has improved on personal financial resources, access to financial services, and financial literacy. This is due to multiple factors. Firstly, the economic impact of the pandemic prompted people to pay more attention to financial security and emergency financing capabilities. Also, the government’s relief policies and public financial education played a role. Additionally, the increased visibility of loans from formal financial institutions gave more people access to compliant and reliable sources of funds. Finally, following the pandemic and other shocks, risk awareness has increased significantly.

Nevertheless, support from others fell significantly. After the end of the pandemic, even though life went back to normal, the frequency and strength of interpersonal connections and care weakened, offsetting the progress made in the other three indicators.

Financially vulnerable affected by debt

The survey also found that the proportion of financially vulnerable people with “low” and “extremely low” financial resilience is decreasing. Although this trend is gratifying, considering that 3.5% of the population are still financially vulnerable even as Taiwan’s economy reaches an unprecedented peak, there is clearly room for improvement.

The survey specifically focused on the financial behaviors and difficulties of the financially vulnerable. Qualitative interviews revealed that they face multiple challenges in terms of financial knowledge, risk management, and access to funds. Due to their unstable income and limited financial knowledge, they are in a weak position and lack sufficient resilience to cope with financial pressure or emergencies.

Interviews revealed that debt is a common pain point. Since financial institutions have strict requirements for proof of income and credit conditions, it is difficult for the financially vulnerable to obtain funds through formal channels, causing them to turn to relatives, friends, or informal loans. Although this a solution in the short term, it often leads to higher financial risks and debt traps, forming a vicious cycle and further weakening their ability to connect to the formal system.

In addition to debt, poor financial behavior among the financially vulnerable deserves more attention, including ignoring emergency reserves, charging into markets in times of high returns, misunderstanding investing as saving, and listening to investment recommendations from online influencers. Many interviewees admitted that they were unfamiliar or even afraid of complex financial products, and others trusted high-risk investments or fell into pyramid schemes due to information asymmetry. These decisions not only caused financial losses, but also further weakened their trust in the financial market, hindering their integration into the formal financial system.

These groups also frequently neglected insurance as a tool for risk management. Many regard it as an additional expense and believe they cannot afford it. As a result, they are not protected against illness or other emergencies, exacerbating their financial pressure.

Financial inclusion and public education urgently needed

The challenges of the financially vulnerable are not just on a personal level; they also affect social stability. To help free the vulnerable from this predicament, the government, banks, social organizations, and individuals need to work together to promote a more inclusive financial ecosystem. Banks should uphold the principle of fair treatment advocated by the FSC and provide more support by building a transparent, fair, and accessible financial environment.